IBBI seeks public comments on new bankruptcy code

IBBI chairman M.S. Sahoo. The board said the window for receiving comments will be open till 31 December. Modifications to the regulations would be made by 31 March and take effect from 1 April 2018. Photo: Priyanka Parashar/Mint

Mumbai: The Insolvency and Bankruptcy Board of India (IBBI) on Thursday called for public comments on the country’s revised bankruptcy code that went into effect in 2016, signalling that it plans to tweak the law, which the government hopes will resolve India’s $150 billion stressed-loans problem.

The board said the window for receiving comments will be open till 31 December. Modifications to the regulations would be made by 31 March and take effect from 1 April 2018.

Lawyers and insolvency professionals maintain that the new Insolvency and Bankruptcy Code, 2016 is a huge step forward from the prior regime. That involved a series of overlapping regulations under which lenders, company promoters and other creditors could initiate competing proceedings in different forums and regions.

All the same, some lawyers contend issues exist with the new code that need to be resolved. Among those is an opportunity for borrowers to get a fair hearing before any matters are admitted to tribunals empowered to rule on these cases.

“This is a lacuna in the new code and it will need to get addressed,” said a lawyer involved in some ongoing insolvency cases under the new code.

The IBB’s move comes just as the new Act is set to be tested in some major cases.

The government recently empowered the Reserve Bank of India (RBII) to push banks to begin insolvency proceedings on non-performing assets under the bankruptcy code. And RBI in June directed lenders to begin proceedings against 12 of the country’s largest defaulters. Reuters